Swedish inflation slows as central bank eyes policy tightening

Inflation in Sweden, as measured by the consumer price index with a fixed interest rate (CPIF), dropped by 0.1% in August from July, but saw a year-on-year increase of 4.7%, according to data released on Thursday by Statistics Sweden (SCB). This is slightly below the central bank’s target for CPIF inflation, which stands at 2%.

Excluding energy costs, inflation was recorded at 7.2%, marking a deceleration from the previous month’s 8.0%. This figure was slightly above the Riksbank’s forecast of 6.9%. The decrease in prices for electricity, food, and package holidays contributed to the slowdown in headline inflation, as reported by the statistics office.

The Riksbank had projected an annual headline inflation rate of 4.8%, contrary to analysts’ expectations of 4.9%. The recorded headline inflation for July stood at 6.4%. Amid these developments, the central bank has shown concern over the weakening Swedish krona and its potential to add to inflationary pressure.

In response to these economic conditions, the Riksbank raised the policy rate to 3.75% in June and indicated that there could be at least one more policy tightening before the end of the year. Market observers widely anticipate a hike to 4.0% following the bank’s next policy decision on September 21.

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